Self-reliant sugar industry

Context:  The government has recently announced that it wants the sugar industry should stop relying on subsidies and other support measures for its survival. Hence, the sugar industry must find alternative business models.

Steps taken by government: for supporting the industry

• Increased ethanol-admixing with petrol: from 10 % to 20%.
• Stipulated remunerative prices for the ethanol: purchased by oil-marketing companies.
• Permitted sugar mills to make ethanol from a variety of materials: Other than the by-products of sugar production.
• Allowed the use of surplus foodgrains: including broken and spoiled grains, for conversion into ethanol — a luxury which so far only the rich countries enjoyed.

Problems associated with the sugar industry

• Issue of “Fair and Remunerative Price” (FRP): The government cannot tinker with the FRP since it can be misconstrued as removal of MSP, and the farmers can join the on-going agitation.
  • It incentivises expanding the area under sugarcane, a water-guzzling crop that is already causing a rapid depletion of groundwater.

Way forward for the sugar industry:

• Introduce a revenue-sharing model
  • Recommended by Rangarajan committee: involves sharing 70% of the mills’ revenue from sugar and by-products, or 75% of the revenue from sugar alone, with cane farmers.
  • A logical way of linking input (sugarcane) prices with those of output (sugar), on the one hand, and sugar production with market demand, on the other.
• Diversification and value addition: of the produce, better use of by-products and higher production of alcohol for industrial use and admixing with vehicular fuels.

Conclusion: Government should reconsider their decision on the revenue-sharing mechanism, and sugar industries should take advantage of the already available concessions.